FY10 Budget Update

Finance and Administration Advisory Group

July 9, 2009

Agenda

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• Review of FY10 budget process

• Current status of FY10 budget

• Strategy & schedule for completion of FY10 budget

Review of FY10 Budget ProcessGoals

• UMass Boston used the four goals of the strategic plan to guide decision-making for the FY10 budget.

1. Increase student access, engagement and success2. Attract, develop, and sustain highly effective faculty3. Create a physical environment that supports teaching, learning, and research4. Enhance campus community engagement through improved organizational

structure.

• We knew that budget cuts will be painful, and that even the smallest reductions have impacts. Consequently, before we made any decisions to reduce expenses, we wanted to understand clearly what the impacts would be.

• We also knew that we must plan for continued enrollment growth and provide high-quality, reasonably priced higher-education services to current and future students.

• We pledged to have a transparent, participatory process to ensure that the campus community works together during these uncertain economic times.

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Review of FY10 Budget ProcessFocus on the Base, Not Merely New

Requests

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• Because of the fiscal challenges anticipated for FY10, the campus’ budget process included a rigorous review of base budgets for consistency with the strategic plan, not merely just a focus on requests for new resources.

• We asked the Vice Chancellors to develop six-percent and nine-percent expense reduction scenarios to their base budgets so that we could understand the implications of major spending cuts on our academic enterprise and our campus operations.

Review of FY10 Budget ProcessOther Important Changes

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• We continued the transition to “all-funds” budgeting:• Moving from a traditional focus on each funding source in “silo” fashion to

looking at the total campus budget.

• All revenue sources belong to UMass Boston; no unit “owns” a trust fund.

• For FY10, we are developing the first campus-wide personnel budget, by expanding position budgeting to cover positions supported by trust funds, not merely those funded by the state appropriation.

• We are moving to more automation of the budget submission process:

• Asked units to submit FY10 non-personnel budgets via FAIR.

• Will be implementing an electronic budget module for FY11 that will further automate the submission process, including enabling units to budget for both personnel (by position) and non-personnel expenses within the same system.

Review of FY10 Budget ProcessFY10 Budget Decision-Making

FrameworkUMass Board of Trustees•Establishes broad policy for the 5 campuses•Approves fees and annual budgets for all campuses

President’s Office•Directs and coordinates fee-setting and budgeting planning for all campuses

Chancellor & Exec Staff•Establishes strategic priorities for UMass Boston•Approves operating budget for campus consistent with UMass Boston’s strategic priorities

Deans•Work with faculty to develop and implement academic vision for their colleges•Work with their departments to develop budget requests consistent with UMass Boston’s strategic priorities and goals for their college

BLRPC•Represents Faculty Council in operating budget process•Provides input on budget process, on budget issues

A&F/Office of Budget & Financial Planning

•Manages UMass Boston’s annual budget process and supports the effective allocation and use of the campus’ financial resources

Reporting relationship

Revenue Advisory Committee

•Will help to develop campus’ FY10 & multi-year revenue strategy

Growth Planning Committee•Will help UMass Boston to understand and plan for the resources necessary to accommodate future growth

• To ensure that we had an open and participatory process, we reached out to various constituent groups on campus.

Union Leadership Committee•Will receive information about FY10 budget challenge and options under consideration to resolve it

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Current Status of FY10 BudgetState Support

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• For FY10, the state has significantly reduced its support for our campus compared to the original FY09 budget:

• FY10 state appropriation for the UMass system will include several formerly separate line items without providing increased funding to the appropriation.

• In the case of UMass Boston, the Collins Center, MODR and the youth program in Nantucket are included in the language of the FY10 appropriation.

• Very real possibility exists of 9C cuts in FY10.

FY09 FY09 Projected FY09 FY10 Bud FY10 BudOriginal Post-9C FY10 Post-9C vs vs FY09

In $ millions Budget Budget Budget vs Origl FY09 Origl Post 9CState Appropriation $84.6 $79.9 $71.5 ($4.7) ($13.1) ($8.4)Including Value of Bens ($6.1) ($16.7) ($10.7)

Current Status of FY10 BudgetFederal Stimulus Money

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• The FY10 budget includes federal stimulus money. Our estimate of UMass Boston’s share is $13.6M.

• Unlike the state appropriation, it does not come with support of fringe benefits.

• We hear rumors that the state will request a waiver from the federal government of the requirement that it fund higher education at the FY06 level or higher, which, if granted, would result in a reduction in FY10 state support.

• One-time, one-year funding. It goes away in FY11, leaving us with $13.6M less in revenue in FY11.

Current Status of FY10 Budget:2-Year Approach to Campus’ Operating

Budget

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• As a result of the fee increase, federal stimulus money, and planned expense reductions, we anticipate a balanced budget for FY10.

• However, we must plan for the possibility of a 9C cut in FY10.

• Additionally, because the stimulus money is available for only one year, we face a large challenge in FY11, even with significant expense reductions.

• For FY11, we propose to use a strategy similar to the one that we implemented in FY09 – use trust fund balances that we want to build up during FY10 to help produce a softer landing in FY11 and to reduce the extremely large amount of expenditures cuts that we would otherwise have to make in FY11.

Projected Projected ProjectedIn $ millions FY09 FY10 FY11Income Before Other Revenue, Expenses, Gains & (Losses) ($0.7) $4.7 ($4.8)Operating Margin -0.6% 1.2% -2.0%Total Increase in Net Assets $1.3 $20.8 $22.2

Strategy for Balancing FY10 Budget

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• We have a three-part strategy for balancing the FY10 budget and preparing for FY11:

• New revenue• Fee increase

• Federal stimulus money

• Old revenue• We are working to identify ways to use existing resources, such

as trust funds, more efficiently

• Expense reductions

Strategy for Balancing FY10 BudgetExpense Reductions

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• A leadership team from the Provost’s Office, Chancellor’s Office, and Administration and Finance reviewed all departmental FY10 budget submissions and worked with the deans and vice chancellors to prioritize reductions.

• Using the 6% reduction scenarios, this leadership group, in consultation with the deans and vice chancellors, classified all budget-reduction suggestions into three groups:

• Savings that, while painful, will have a minimally negative impact and should be pursued immediately

• Reductions that would have a more significantly negative impact and require greater deliberation

• Cuts that slice deeply into our core educational values and strategic initiatives and are thus measures of last resort.

Strategy for Balancing FY10 BudgetExpense Reductions (continued)

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• We are moving forward with the first category of budget reductions.

• These savings include operational belt-tightening, eliminating vacant positions, and other cost-cutting measures.

• We will implement these cuts at the start of the fiscal year by reducing unit FY10 budgets.

• We will schedule a meeting with each VC to work through the details.

• Although we requested 6% and 9% scenarios from departments, we are not implementing across-the-board reductions.

• End result of the review by the leadership group is that the dollar amount of reductions and reductions as a percent of base budget will vary by unit.

• We will continue to review the cost reductions in the second group as our revenue picture becomes more certain.

Strategy for Balancing FY10 BudgetBudget Completion Timetable

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Through July 17 FY10 budget leadership group meets to review and make FY10 budget decision recommendations.

July 17 – 31 Submit FY10 Budget recommendations to Chancellor for his review & decision-making.

July 15 – 24 FY10 budget leadership group to meet with:

BLRPC of the Faculty Council

Union Leaders

to discuss FY10 budget decisions and implementation of expense reductions.

July 20 – 31 Meetings with OBFP with Vice Chancellors and their representatives to discuss the implementation of the #1 expense reductions.

First week of August Announcement to Campus community of FY10 Budget decisions.

Early September Spending plan documents forwarded to units.

October 2 FY10 Spending Plans due to OBFP.